Small Business

How to Structure Your Sales Team

Whether you take your sales effort in house, use a sales brokerage, or go with independent reps, each route has key factors to weigh

I make a product that I sell at craft fairs but I'd like to get it into retail stores, too. Do I need to hire sales representatives, and if so, what tips do you have for finding and managing them?—C.Y., Jamestown, R.I.

You have several choices: Hire in-house sales agents, contract with a sales brokerage, or identify independent sales reps who will pitch your products along with a host of other product lines they represent. Typically, you'll pay base salaries to dedicated salespeople working exclusively for you and give them some percentage of sales as a commission; independent sales reps are more likely to work solely on commissions, but they'll want a larger percentage for their efforts.

Sit down and come up with a marketing and sales plan if you don't already have one. Your sales hires should fit into this overall plan if you want to achieve maximum efficiency and avoid missteps. Getting some advice from an expert, if you can afford to hire someone to brainstorm with you, would help you plot out where your company is going and how best to set up for that future now.

For instance, if you see your company increasingly being able to take advantage of larger economies of scale in the next few years, it might be smart to hire sales employees now, says Dan Kleinman (BusinessWeek.com, 4/23/08), author of the recently published All-Star Sales Teams. "Beginning your own sales force offers you better control, but more emotional hassles. You potentially get a dedicated comrade-in-arms, but you have to manage that relationship," he says.

A Broker Agency Can Help Manage Sales

On the other hand, if you don't see your company scaling up quickly, independent sales agents may be easier and cheaper for the near term. But you'll need to carefully screen and qualify any reps that you hire, something that can be tricky if they're across the country. "You want these people to represent your product and your philosophy in the best possible light; particularly if you are striving for replenishment in the future," Kleinman says. You also want to make sure that independent sales people—who typically represent multiple product lines—will be able to put ample time and energy into selling your products when they are likely to be juggling a lot of priorities.

A middle way is to work with a broker agency that has many sales brokers operating under its umbrella. You'll have to pay more because the agency takes an overhead slice for its operations. And, as with independent sales reps, sometimes the individual salesperson tends to go for the easy sales first and concentrate on established relationships and products rather than putting in the extra effort on a new product, Kleinman says. "The positive side is that the sales staff are being managed by their firm so you have a go-between to help you manage sales activity," he notes.

One tip you can use with independent agents is to develop "accelerators" that reward them when their sales exceed a certain target by accelerating their gains. "Obviously, you do this in concert with your cost of sales, margin, and cash flow calculations, but accelerators are attention-getters and useful in motivating brokers," Kleinman says. He also recommends that you set payment terms based on your business needs and financial parameters and your value structure. Don't get sucked into doing it the sales reps' way if that method doesn't benefit your company.